Malaysia Should Broaden Tax Base, Improve Subsidy Targeting To Withstand Future Shocks – IMF
KUALA LUMPUR, Oct 15 (Bernama) -- Malaysia should continue fiscal consolidation, broaden its tax base and improve subsidy targeting to strengthen its resilience to future economic shocks, according to the International Monetary Fund (IMF).
IMF Asia and Pacific Department director Krishna Srinivasan said Malaysia and Brunei were the two ASEAN countries exporting energy and benefiting from the recent energy shocks.
He said both countries also maintained discipline in preserving price stability and fiscal integrity.
“In the case of Malaysia too, I will say that maintaining fiscal consolidation, either through broadening the tax base, reducing incentives, lowering subsidies or targeting subsidies better will be useful,” he said during a press briefing on the IMF’s latest Regional Economic Outlook for Asia and the Pacific, which presented updated forecasts, analysis and policy recommendations for the region.
Srinivasan said fiscal consolidation applies to countries worldwide, as economies will continue to face shocks and need to prepare for future disruptions by strengthening their fiscal buffers.
He also stressed the importance of maintaining price stability, while the IMF’s broader regional assessment highlighted the need for fiscal prudence as public debt remained above pre-pandemic levels and fiscal space became increasingly constrained.
The IMF said Asia-Pacific’s economic resilience was supported by stronger-than-expected global growth, technology-related exports and investment, as well as trade diversification and robust intra-regional trade, despite tariff-related disruptions.
Export growth accelerated sharply in the first half of 2026, driven mainly by technology products, as rising demand for artificial intelligence infrastructure boosted semiconductor demand and investment in data centres.
However, the IMF cautioned that the region’s resilience was not unlimited, with risks including renewed tensions in the Middle East, a reassessment of AI-related profitability and productivity, fiscal vulnerabilities, higher sovereign borrowing costs and an El Niño cycle that could intensify fiscal and inflationary pressures.
Asia-Pacific growth is projected to ease to 4.8 per cent in 2026 and 4.4 per cent in 2027 from 5.0 per cent in 2025, although the region is expected to contribute more than two-thirds of global growth.
On monetary policy, the IMF said central banks should continue to prioritise price stability, communicate clearly and be ready to tighten policy where inflation expectations were less anchored or inflation proved more persistent.
For fiscal support, the IMF emphasised protecting people affected by economic shocks rather than attempting to suppress prices, while maintaining sound medium-term fiscal frameworks.
Srinivasan also highlighted the need for structural reforms across Asia-Pacific, including addressing youth unemployment and skills mismatches, supporting adaptation to artificial intelligence, strengthening social protection, improving energy security through diversification and renewable energy, rebuilding fiscal buffers and deepening regional integration.
At the time of writing, West Texas Intermediate crude oil traded at US$95.16 per barrel, up 0.07 per cent, while Brent crude fell 1.66 per cent to US$104.30 per barrel.
-- BERNAMA